[A2k] The G8, Obama, and food insecurity in Africa

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THIRD WORLD NETWORK INFORMATION SERVICE ON SUSTAINABLE AGRICULTURE


Dear friends and colleagues,
Re: The G8, Obama, and food insecurity in Africa
The following article was published in the South-North Development Monitor
(SUNS) #6740, 14 July 2009 and is reproduced here with permission.

With best wishes,
 Third  World Network
131 Jalan Macalister,
10400 Penang,
Malaysia
Email: twnet@po.jaring.my
Websites: www.twnside.org.sg <http://www.twnside.org.sg/> ,
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Development: The G8, Obama, and food insecurity in Africa
Geneva, 13 Jul (Martin Khor*) -- Last week, Barack Obama visited Ghana on
his first trip to Africa as President of the United   States. In his speech
in Ghana's Parliament, he stressed the role of good governance and the need
for democratic practices and correct policies if the continent is to develop
out of poverty.

Just before that, the G8 Summit in Italy agreed on a US$20 billion programme
to promote food security in Africa, to help the countries produce their own
food instead of relying on food aid or imports.
In a press conference, Obama compared Kenya to South Korea, saying that both
countries once had the same per capita income but Kenya remains poor while
Korea had become an economic powerhouse.
The implication of all this is that East Asian countries like South Korea
did well because they had good governance and democracy while African
countries have lagged behind because of undemocratic practices and bad
policies.
The assumptions of the G8 Summit, and of Obama, are correct only to a
limited degree (for example, Korea's development took off while the country
was under dictatorship) and miss the main reasons why Africa has become food
dependent. As a result, the large funds pledged may miss the opportunity of
helping Africa become food secure.

Of course, governance and good policies are crucial elements. But any
comparison between developments in Africa and East Asia must take into
account that most African countries were unfortunate enough to come under
the influence of World Bank and IMF conditionalities whereas most East Asian
countries did not and were free to adopt their own policies.

The decline in agriculture in many African countries was due to the
structural adjustment policies of the IMF and World Bank. The countries were
asked or advised to dismantle marketing boards and guaranteed prices for
farmers' products; phase out or eliminate subsidies and support such as
fertilizer, machines, agricultural infrastructure, and reduce tariffs of
food products to very low levels.

Many countries that were net exporters or self-sufficient in many food crops
experienced a decline in local production and a rise in imports which had
become cheaper because of the tariff reduction. Some of the imports are from
developed countries which heavily subsidize their food products.

The local farmers' produce were subjected to unfair competition, and in many
cases could not survive. The effects on farm incomes, on human welfare, on
national food production and food security were severe.
The case of Ghana itself, which Obama chose for his first African visit,
illustrates this. The policies of food self-sufficiency and government
encouragement of the agriculture sector (through marketing, credit and
subsidies for inputs) had assisted in an expansion of food production.

The policies were reversed starting from the mid-1980s and especially in the
1990s, when Ghana relied on loans from the World Bank and IMF and these two
bodies conditioned their loans on new agriculture policies.
The fertilizer subsidy was eliminated, and its price rose very
significantly. The marketing role of the state was phased out. The minimum
guaranteed prices for rice and wheat was abolished, as were many state
agricultural trading enterprises and the seed agency responsible for
producing and distributing seeds to farmers, and subsidized credit was also
ended.

Applied tariffs for most agricultural imports were reduced significantly to
the present 20%, even though the WTO bound rate is around 99%. This,
together with the dismantling of state support, led to local farmers being
unable to compete with imports that are artificially cheapened by high
subsidies, especially in rice, tomato and poultry.

Rice output in Ghana in the 1970s could meet all the local needs, but by
2002, imports made up 64% of domestic supply. In 2003, the US exported
111,000 tonnes of rice to Ghana. In the same year, the US government gave
US$1.3 billion in subsidies for rice.

A government study found that 57% of US rice farms would not have covered
their cost if they did not receive subsidies. In 2000-2003, the average
costs of production and milling of US white rice was US$415 per tonne, but
it was exported for just $274 per tonne, a price 34% below its costs. No
wonder farmers in Ghana could not compete with imported American rice.

Tomato was a thriving sector in Ghana. As part of a privatization programme,
tomato-canning factories were sold off and closed, while tariffs were
reduced. This enabled the heavily subsidized EU tomato industry to penetrate
Ghana, and this displaced livelihoods of tomato farmers and industry
employees.

Tomato paste imported in Ghana rose from 3,200 tonnes in 1994 to 24,077
tonnes in 2002. Local tomato production has stagnated since 1995.
Tomato-based products from Europe have made inroads into African markets. In
2004, EU aid for processed tomato products was 298 million Euros, and there
are many more millions of Euros in indirect aid such as export refunds.
Ghana's poultry sector started its growth in the late 1950s, reached its
prime in the late 1980s and declined steeply in the 1990s. The decline was
due to withdrawal of government support and the reduction of tariffs.
Poultry imports rose by 144% between 1993 and 2003, and a significant share
of this were heavily subsidized poultry from Europe.

In 2002, 15 European countries exported 9,010 million tonnes of poultry meat
for Euro 928 million, at an average of Euro 809 per tonne, while the subsidy
for the exported poultry was an estimated Euro 254 per tonne.
Between 1996 and 2002, EU frozen chicken exports to West Africa rose
eight-fold, due mainly to import liberalization. In Ghana, half a million
chicken farmers have suffered from this situation. In 1992, domestic farmers
supplied 95% of Ghana's market, but this share fell to 11% in 2001, as
imported poultry sells cheaper.

In 2003, Ghana's parliament raised the poultry tariff from 20% to 40%. This
was still much below the bound rate of 99%. However, the IMF objected to
this move and thus the new approved tariff was not implemented.
Another major problem facing Ghana and other African countries is the free
trade agreements (known as the Economic Partnership Agreements) they are
scheduled to sign with the European Union this year.

Under the EPA, African countries are asked to lower their tariffs to zero on
80% of their products. Agricultural products are among those affected. This
will lock them into a trade policy that will perpetuate what the IMF and
World Bank started, with artificially cheapened imports continuing to
overwhelm the domestic food market.

Thus, if the G8 countries really want to assist Africa to boost its domestic
food production, their US$20 billion in funds has to be accompanied by a
change in policies. Unless this is done, the programme will not succeed. And
Africa will most likely continue to be blamed for its lack of good
governance.

The following needs to be done if Africa is to increase its domestic food
production:
1. The countries' economic and trade policies, often the result of advice of
international financial institutions, have contributed to the stunting of
their agriculture sector. African countries must be allowed to provide
adequate support to their agriculture sector and to have a realistic tariff
policy to advance their agriculture, especially since developed countries'
subsidies are continuing at a high level. The developed countries should
quickly reduce their actual levels of subsidy.
2. The agriculture policy paradigm in developing countries must be allowed
to change. Countries should have the policy space to expand public
expenditure on agriculture. African governments must be allowed to provide
and expand support to the agriculture sector.
3. Developing countries should place high priority on expanding local food
production. Accompanying measures and policies should thus be put in place.
The countries should be allowed to calibrate their agricultural tariffs in
such a way as to ensure that the local products can be competitive and the
farmers' livelihoods and incomes are sustained, and national food security
is assured.
4. The proposals of developing countries (led by the G33) on special
products and special safeguard mechanism, aimed at food security, farmers'
livelihoods and rural development, at the WTO should be supported. Effective
instruments that can meet the aims should be established.
5. The policies of the World Bank, IMF and regional development banks should
be reviewed and revised as soon as possible, so that they do not continue to
be barriers to food security and agricultural development in developing
countries.
6. The actual levels (and not just the bound levels) of agricultural
domestic subsidies in developed countries should be effectively and
substantially reduced. There should also be new and effective disciplines on
the Green Box subsidies to ensure that this category does not remain an
"escape clause" that allows distorting subsidies that are detrimental to
developing countries.
7. There should be a review of the EPAs between the EU and African
countries. In light of the food crisis and the global economic crisis,
developing countries that have signed or are in the process of negotiating
FTAs should ensure that the FTAs provide enough policy space to allow
sufficiently high tariffs on agricultural imports that enable the fulfilment
of the principles of food security, farmers' livelihoods and rural
development. In the case of the EPAs, there should not be any pressure on
African countries to sign them until the proper policy framework is put in
place.
(* Martin Khor is the Executive Director of the South Centre, and was
formerly the Editor of the SUNS). +






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